Swiss Politics and Economy

[LostInSpace]

I've moved this topic from another thread. Anyway, I thought I remembered a loophole in paying Swiss taxes.

There are no taxes on the money you invest in Switzerland - not on capital gains, and not on interest.

There are only 2 exceptions to this rule:

Exception 1 : Swiss withholding tax

There is a 35% withholding tax on the basic interest earned on your account. "Withholding" means that the bank will keep 35% and send it to the Swiss tax authorities (on a no-name basis), and pay you only 65% of the interest earned. To avoid this tax, your banker will propose you to invest the funds in a money market fund which will be exempt from this whitholding tax.

Here's another good read

The power of tax-deferral for your offshore investments is here! Global investors can now benefit from a safe, tax-deferred vehicle from Switzerland with the new variable annuities offered by JML.

A Swiss variable annuity is essentially a Swiss bank account wrapped in an annuity contract. By putting an annuity wrapper on a group of Swiss bank mutual funds, we are able to exclusively offer a tax-favored environment for our American clients.

In a few words, here's how it works. You invest a lump sum up front, structuring your portfolio as you see fit into sub-accounts. Money can be put into bond and equity fund portfolios allocated according to your investment goals (e.g., income or growth). It is a "variable" annuity (as opposed to a "fixed" annuity) because returns are not guaranteed, but you have considerable freedom to choose where your money goes. Unlike a mutual fund which may incur capital gain and investment income taxes each year, variable annuities are sheltered from income and capital gains taxes during the accumulation phase and partially sheltered from income taxes during the payout phase.

You can also transfer money from sub-account to sub-account without incurring taxes. If you die during the accumulation phase -- the so-called "death benefit" -- your heirs would get at least as much as you had invested, even if your investments declined in value. This is the insurance aspect. But like a mutual fund, you take on the risk of the market tumbling to get potentially higher returns.

During the payout phase, the advantages of tax deferral continue for the amounts still invested. The portion of the payout considered as gain is taxed at ordinary income rates (usually lower after retirement) while the portion considered to be return of principal is not taxable.

[ 08-23-2004, 08:38 PM: Message edited by: LostInSpace ]

[LostInSpace]

quote:

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Originally posted by nomad:

Nice try, but still not 100% exact:

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I'm not trying to argue the point of no taxes just discussing the tax issue and at the same time try to figure out how one can get away without a dime of tax. From further reading I've done, one is going to pay some percentage of tax especially in the U.S. since 9/11 it's gotten alot harder for americans to keep secret offshore accounts because of the terrorist money tracking the government does. What I do like about the swiss banking system is that their banks pay a hell of a lot better interest than the cheap a$$ banks here in the U.S.

BTW: I haven't fully read your response yet but will when I get back from work.

[LostInSpace]

Not at all. I just thought you thought I was arguing.

If you may bring to my attention elements that I ignore....

Same here.